Starbucks Mobile Orders Bring Traffic Jams to Pickup Counterby
Snags contributed to company’s lower-than-expected sales
Coffee giant working to correct problem, operating chief says
Starbucks Corp.’s much-ballyhooed mobile-ordering system has brought a painful side effect to the coffee giant: traffic jams at the pickup counter.
Because customers are now able to order and pay for coffee via their phones, many of them now head directly to the part of the cafe where beverages are handed out. That’s created pileups at Starbucks and frustrated some customers enough that they’ve canceled their orders, said Chief Operating Officer Kevin Johnson.
“The use of mobile order and pay continues to accelerate,” Johnson said in an interview. “That’s created congestion at the handoff.”
The snags hurt U.S. sales in the first quarter, contributing to disappointing results for the world’s largest coffee chain. But the company has been working to correct the problem, Johnson said.
The stakes of getting the process right are high for Starbucks, which now generates 27 percent of its U.S. sales via mobile payments. The company is counting on the system to help attract customers and speed them through its stores. Johnson, a veteran of Microsoft Corp. and Juniper Networks Inc., is ascending to the chief executive officer job in April -- a move seen as solidifying Starbucks’ tech ambitions.
Starbucks also cited a broader restaurant slump for creating a “challenging environment” last quarter. The company reined in its forecast for the full year, saying revenue will rise between 8 percent and 10 percent. It had previously predicted a double-digit increase.
The stock fell as much as 4.8 percent to $55.65 in New York on Friday after the results were released. Before the drop, Starbucks’ shares had increased 5.3 percent this year, outpacing the 2.6 percent gain of the S&P 500 Index.
Johnson is taking the reins from Howard Schultz, who served two stints as CEO and built Starbucks into a global coffee empire. Johnson inherits a company with “outsized expectations” for performance, said Jennifer Bartashus, an analyst at Bloomberg Intelligence. Against that backdrop, the company’s 3 percent same-store sales growth last quarter wasn’t good enough.
“In the realm of restaurants in general, 3 percent is not a bad result,” she said. “But Starbucks is considered more of a premium brand. There was an expectation that they would be slightly higher.”